(Reuters) - A Wall Street regulator is probing into whether prices linked to the Cboe Volatility Index .VIX have been manipulated, the Wall Street Journal reported on Tuesday, citing people with knowledge of the matter.
The Financial Industry Regulatory Authority (FINRA) is scrutinizing whether traders placed bets on S&P 500 options in order to influence prices for VIX futures, according to the Journal.
The Cboe Volatility Index is a widely followed gauge of future stock market volatility on Wall Street.
A law firm representing an “anonymous whistleblower” on Monday alleged in a letter to U.S. financial regulators that the VIX is being manipulated, causing billions of dollars in losses a year to unwary investors.
Claims in the letter outline how trading firms have taken advantage of the way the VIX is being calculated in order to manipulate the index.
FINRA was not immediately available for comment.
“Cboe has a dedicated regulatory department that works with FINRA to monitor certain trading activity for our securities markets, including trading activity that could impact the VIX settlement,” Cboe’s Chief Regulatory Officer Greg Hoogasian said in a statement and declined to comment further.
Reporting by Nikhil Subba in Bengaluru; Editing by Anil D'Silva
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.